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Registration

Any person who provides prescribed taxable services and has reached the prescribed threshold (where applicable).

Are there penalties for not registering or late registration?

Yes. Any person who fails or refuses to register or apply for a license is liable on conviction to a fine not exceeding 5,000 Malaysian Ringgit (RM) or to imprisonment not exceeding 2 years or to both.

Is voluntary Services Tax registration possible for an overseas company?

No.

Are there any simplifications that could avoid the need for an overseas company to register for Services Tax?

Services Tax grouping

Certain professional services provided within the same group of companies are not taxable, subject to meeting certain requirements.

Can an overseas company be included in a Services Tax group?

Two or more companies are eligible to be treated as companies within a group of companies if one company controls each of other companies. As such, overseas companies are also considered to be within a group of companies only for the purpose of determination whether a company will fall within the same group.

Returns

A taxable period for Service Tax is 2 calendar months. Service Tax returns are filed within 28 days of the following month of the taxable period.

Are there any other returns that need to be submitted?

No.

If a business receives a purchase invoice in foreign currency, which exchange rate should be used for Services Tax reporting purposes?

If a business receives purchase invoices, there is no service tax implications. Where a taxable person issues invoices in foreign currency, it is recommended that prior permission from Customs is obtained.

Invoices

Yes. Generally, every registered person who makes a taxable supply of goods or services must issue an invoice.

What do businesses have to show on a tax invoice?

the charges for the taxable service

the amount of service tax payable (which must be stated separately from the charges for the taxable service)

invoice serial number.

Can businesses issue invoices electronically?

Yes, but businesses has to obtain prior approval from the Director General from Customs in writing.

Is it possible to operate self-billing?

No.

Can a business issue Services Tax invoices denominated in a foreign currency?

No. The amount of service tax must be shown on any invoice in ringgit and sen. Therefore, where the taxable person’s invoices are denominated in foreign currency, it is recommended that prior permission from Customs is obtained.

Anti-avoidance

Penalty regime

What is the penalty and interest regime like?

The general penalty is the imposition of fine not exceeding RM5,000 or imprisonment not exceeding 2 years or both. The penalty for late payment of service tax returns, however, is 10 percent of such unpaid amount for the first 30 days and the rate shall be increased by 10 percent for the second period of 30 days and for every succeeding period of 30 days or part thereof during which such amount remains unpaid to a maximum penalty of 50 percent.

Miscellaneous

In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?

Yes. Malaysia has specific facilities and rules with regards to free zones which are specified under Free Zone Act. Subject to this Act, goods and services of any description, except those specifically and absolutely prohibited by law, may be brought into, produced, manufactured or provided in free zone without payment of any customs duty, excise duty, sales tax or Service Tax.

Are there indirect tax incentives available in your country (e.g. reduced rates, tax holidays)?